Retail crisis? British Land and Kingfisher highlight troubles
British Land writes down property value
As we’ve said before, who’d be a landlord right now? (Intu
warning signals more high street trouble, 03/05/19). British Land today
follows Land Securities in writing down its assets due to the collapse in the
high street retail sector. The firm has written down its portfolio by 4.8%, with
the retail part of that written down by 11.1%. Management notes candidly
that difficulties were most pronounced in department stores – no great
surprise there. Elsewhere things are strong – offices +1.1%, other developments
+10.8%. LFL rental growth of £15m offset the £14m
impact from CVAs.
As a percentage of its portfolio, department stores down
have been cut to 1% from 5% in 2014, highlighting just how far the sector has
fallen in just a few years. Overall the retail portfolio is being downgraded
substantially – hardly surprising given the rate of store closures and
well-documented problems for a
number of large and small players in the
Property companies like
British Land – just like Land Securities yesterday – need to react to this and
protect their interests. Land Securities wrote down the value of its
property by £557million to £13.8bbn, with retail parks asset value -15.5%, and
shopping centre assets -11.7%.
this month Intu said LFL net rental income will be
down 4-6% this year. Previously it had guided for incomes to decline by 1-2%.
As we said at the time, it may not be the last time that the company has to disappoint
the market. In February it took a big write down on its property values, which
dragged the company into the red. Clearly tough
times for landlords, but tougher for retailers.
Kingfisher struggles in France
Kingfisher is today
hosting an Innovation Day for investors and analysts in London today where it
will show off some spangly new products. All very nice, but one rather feels
that investors would prefer to see what the new strategy is going to look like and
who the next CEO will be first.
Trading remains tough in France, but things are improving
in the UK, where B&Q enjoyed a decent bump in like-for-like sales.
UK & Ireland total sales rose 5%, or 3.4% on a LFL
basis. B&Q LFLs rose 2.8%, a good performance driven by weather-related
sales. A rare event where a retailer says the weather helped. Screwfix
remains a real stalwart and growth shows no real tailing off – sales up
9.6% and LFL +4.5%.
France is much tougher – total sales -3.4% (LFL
-3.7%). Castorama sales were down 2.4%, with Brico Depot –4.5%, or
–5.1% LFL. Romania and Poland sales were very strong still.
Pressure on management to come up with a new plan will
mount and this could well include a look at breaking up this company into
smaller parts. Sometimes you are not greater than the sum of your parts.